United States Steel Corp. reported net income of $455 million on net sales of $3.76 billion for the first quarter of 2005.

The $455 million net income ($3.48 per diluted share) compares to fourth quarter 2004 net income of $468 million ($3.59 per diluted share) and first quarter 2004 net income of $58 million (47 cents per diluted share). Income from operations was $640 million, which compares with income from operations of $547 million in the fourth quarter of 2004 and $151 million in the first quarter of 2004.

Results included a pre-tax gain of $95 million from a settlement agreement regarding property tax disputes in Gary, Ind. This favorable effect and other items not allocated to segments increased first quarter 2005 net income by $58 million (45 cents per diluted share). Fourth quarter 2004 net income was increased by $14 million (10 cents per diluted share) due to certain income tax benefits totaling $30 million and other items not allocated to segments. The increase was dampened by a $10 million (eight cents per diluted share) reduction due to an income tax charge for settlement of a dispute regarding tax benefits for U. S. Steel Kosice (USSK) and other items not allocated to segments.

Net interest and other financial costs, $22 million, included a favorable adjustment of $25 million, which is included in the previously mentioned $95 million pre-tax gain from the Gary Works property tax settlement, and a foreign currency translation loss of $27 million. Net interest and other financial income of $23 million in the fourth quarter of 2004 included a foreign currency translation gain of $46 million, which exceeded ongoing interest expense.

Reportable Segments and Other Businesses—In the first quarter of 2005, U. S. Steel eliminated the Real Estate segment, the results of which are now included in Other Businesses. U. S. Steel's reportable segments and Other Businesses reported segment income from operations of $652 million ($127 per ton), which compares with $648 million ($120 per ton) in the fourth quarter of 2004 and $162 million ($29 per ton) in the first quarter of 2004.

Segment results were slightly improved from fourth quarter 2004. The decrease in Flat-rolled income was the result of contract price increases that were more than offset by lower Flat-rolled shipments and higher coke production costs related to increased coal costs and coal delivery disruptions. The substantial improvement in European operating results compared to the fourth quarter was due primarily to increased prices coupled with improved operating costs, as operating costs in the fourth quarter of 2004 included the negative impact of a refinement of inventory accounting policies. These favorable items were partially offset by higher costs for raw materials and lower shipment volumes. Results for Other Businesses declined mainly due to seasonal and production mix effects at iron ore operations in Minnesota.

Outlook—Commenting on expectations for 2005, Surma said, "With a strong first quarter behind us, we anticipate another very profitable year with significant contributions from all of our business segments."

For Flat-rolled, second quarter 2005 average realized prices are expected to decline somewhat compared to the first quarter based on recent spot market price trends, while shipments should remain in line with the first quarter level. Flat-rolled costs in the second quarter are also expected to remain in line with the first quarter despite planned outages on three blast furnaces, preparatory costs related to the third quarter rebuild of our largest blast furnace at Gary Works, and the impact of an unplanned outage by the third-party oxygen supplier for the Mon Valley Works, which began in late March. For full-year 2005, Flat-rolled shipments are expected to be about 14.5 million tons.

For U. S. Steel Europe (USSE), second quarter average realized prices are expected to be generally in line with the first quarter of 2005. Shipments should be moderately improved, but segment results are expected to decline primarily due to higher costs for raw materials. USSE shipments for full-year 2005 are projected to be approximately 5.8 million net tonnes, reflecting expected higher operating and shipment levels in Serbia following the planned mid-year startup of the second blast furnace.

Shipments for the Tubular segment in second quarter 2005 are expected to be lower than first quarter levels due mainly to a planned outage at Lorain Pipe Mills. Average realized prices should improve moderately and tube round costs will increase. During the first quarter of 2005, prices of metallic additions used to produce tube rounds increased dramatically. Accordingly, the transfer price for tube rounds supplied by Flat-rolled, which was established at the beginning of 2005 based on projected costs, was increased by $53 per ton effective April 1, 2005. Full-year shipments for Tubular are expected to be approximately 1.2 million tons.

Second quarter 2005 results for Other Businesses will improve compared to the first quarter of 2005, which was negatively affected by normal seasonal effects at iron ore operations in Minnesota.